Why Government Wastes Money But Small Business Does Not

business owner to explain the continued wastefulness of government spending: There is no “bottom line,” no accountability but government employees get “credit” for giving money away. You can’t lose money forever in a private business, but you can waste taxpayer money for a very long time before they revolt. This process can become especially poisonous when it is prolonged by class warfare, taxing the few to pay for the benefits of the many. In a competitive, private sector world, inefficiency is weeded out by the need to have a positive bottom line. In the government sector, there are just continuous calls for the need for more revenue, in the form of forced taxation of course, not voluntary purchases.

For the same reason, we were warned (even by a Democrat president) that public sector workers should not be allowed to unionize. While the over-zealous exercise of union’s power to raise their wages and benefits and tax customers can drive a company out of business (like GM, which could only survive with tens of billions of taxpayer dollars), this has not happened in the public sector until recently, when the excesses became intolerable to the taxpayers who had to pay for them. Now, cities are going bankrupt, unable to pay for the benefits that unions were able to get politicians to promise them at the expense of taxpayers. All the while, the government institutions were managed inefficiently.

Recently, the cost of fraud in government disability programs has surfaced again in the news. A federal government worker can retire with 60 percent of pay, taxable of course. If this worker can get disability however, the worker can receive 75 percent of pay, not taxable. “Mental” disability claims are up 300 percent. The government does little to verify claims, preferring to “assume the applicant is honest” or seeing no need to control the costs (after all, it’s just a colleague or union member getting the benefits) since there is no bottom line to look after. Right. Who would ever misuse government funds? Certainly not government employees! The Postal Service is an exception as disability costs come out of its budget (bottom line) so it has the incentive to minimize abuse. Most other agencies simply pass their disability costs on to the Department of Labor for reimbursement.

The Administrator of the Department of Justice disability program said he doubted there was fraud “because the integrity of the personnel and desire to return to work minimizes the risk for fraudulent claims.” The DOJ Inspector General said: “We conclude it is not sufficient to rely on the integrity of all personal to prevent any abuse.” Indeed, why retire when leaving on disability pays so much more? But the DOJ has no incentive to minimize this cost, preferring to pass the cost of its disability payments on to the DOL and of course ultimately on to the taxpayer.

So, it is no surprise that federal government programs are rife with waste and fraud. Power in Washington is measured by the size of the budget, the number of programs run and the regulatory reach. More is always better. There is no need to keep an eye on costs, the government can borrow and tax to cover them. The ability to defer costs into the future by borrowing has led to the downfall of governments and economies, and will continue to do so. This is why “taxes” and “the cost of regulations and red tape” continue to head the list of top problems faced by small-business owners. They pay for government waste, fraud and inefficiency and the abuse of regulatory power. Small-business owners cannot spend money on wasteful endeavors or they will fail. The only time they do is when the government forces them to.